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EU gives GPPs the green light for auto-enrolment

The European Commission has confirmed automatic enrolment of members into contract-based schemes, such as group personal pensions, from 2012, is consistent with EU law.

Money Marketing revealed the deal was almost done last month but the Department for Work and Pensions announced the news officially this morning.

Industry and consumer groups have been lobbying the EU to make the allowance amid fears that employers would level-down to personal account if employees were not auto-enrolled into their existing schemes. Contributions to GPPs are generally higher than the levels proposed for personal accounts which means if employers close existing schemes, or level down contributions to the personal accounts rate, employees could be significantly worse off in retirement.

Pensions Reform Minister Mike O’Brien says: “We have worked hard with industry representatives and the European Commission to ensure we get this right and we are delighted with the outcome. A wide range of stakeholders supported our discussions with the commission, which is a testament to the consensus we’ve managed to build around the pension commission reform package. Automatic enrolment is key to combating the inertia that prevents
people from saving and I am pleased that millions of people who work
for an employer who offers a workplace personal pension will be able
to benefit from this important social reform.”

Association of British Insurers director general Stephen Haddrill says: “It is extremely good news that the Government has confirmed its plans to include automatic-enrolment into workplace personal pension schemes as part of the 2012 pension reform package. The ABI has, from the start of this debate, consistently argued for this outcome to ensure that saving through workplace pensions continues to grow.”

Aegon head of pensions development Rachel Vahey says: “This announcement confirms the Government wants GPPs to play a key role in pensions beyond 2012. Denying contract-based schemes the ability to implement automatic enrolment could have forced their closure, leaving millions worse off in retirement. This would have been completely against the Government’s stated aim of protecting good existing schemes and targeting personal accounts at people without access to one.”

Standard Life head of pensions policy John Lawson says: “This is a sensible conclusion to a protracted negotiation. These directives were never intended to stop employees joining company schemes and benefiting from an employer contribution. Thousands of people would now be members of their pension scheme had employers been allowed to operate automatic enrolment. I urge the Government to bring these new provisions into force at the earliest possible date.”

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